How High Tech Is the Tenth District? - Federal Reserve Bank of Kansas City · 2 FEDERAL RESERVE...

How High Tech Isthe Tenth District?

By Chad Wilkerson

Newspapers in the Tenth Federal Reserve District generally keepa close eye on where their cities rank in national studies ofhigh-tech activity.1 Readers have good reason to be interested

in how “high tech” their communities are, despite the recent downturnin the sector. High-tech workers are among the best paid of all workersand, if these recent studies are correct, an area’s failure to embrace the“New Economy” could result in a lower standard of living and feweropportunities for residents down the road. But studies of high-techcities, which are usually produced by think tanks, trade groups, or busi-ness magazines, have varying results and usually focus only on majormetropolitan areas. As a result, it is often difficult for policymakers,businesses, and residents in the Tenth District to understand where theyreally stand in the “New Economy” and how they got there.

This article shows that much of the Tenth District is quite high tech,once the geographic distribution of the region’s population is taken intoaccount. Across the country, the overarching determinant for theamount of local high-tech activity appears to be a metro’s size. Becausethe Tenth District has relatively few large cities, the level of high-techactivity in most district states falls short of the national average. Butanalysis of high-tech activity in metro areas shows that nearly all of the

Chad Wilkerson is an associate economist at the Federal Reserve Bank of Kansas City. Thisarticle is on the bank’s website at www.kc.frb.org.

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district’s larger metros exceed national averages for cities their size. Infact, several of the region’s larger cities rank among the most high-techplaces in the nation.

The first section of the article defines “high tech” and documentsthe overall level of high-tech activity in the Tenth District. The secondsection explains why high-tech firms and workers concentrate in metroareas and shows that, given the size of its cities, the district is quite hightech. The third section uses a set of case studies to explain why high-tech activity in many Tenth District cities exceeds national averages.

I. OVERVIEW OF HIGH TECH IN THE NATIONAND DISTRICT

Determining how high tech the Tenth District is requires defining“high tech” in a measurable way. Agreement has been fairly wideamong researchers about what high tech means in general. Some quotea 1982 definition by the Congressional Office of Technology Assess-ment: “The design, development, and introduction of new products andinnovative manufacturing processes, or both, through the systematicapplication of scientific and technical knowledge” (Hecker). In practice,most studies have used some measure for the output—or the value ofgoods and services produced—of certain local industries classified ashigh tech to rank cities according to their level of high-tech activity.2

But despite this general agreement about a definition of “high tech”and the type of measure to be used, there has been considerable dis-agreement on which industries should be considered high tech. Onecommon method of industry selection is to simply choose industrieswhose products and services are widely considered as high tech—suchas computer manufacturing and online information services. Anotherfairly common approach is to determine the percentage of an industry’snational employment in high-tech occupations and to consider theindustry high tech if this percentage significantly exceeds the nationalaverage across all industries. For example, one recent study consideredan industry high tech if at least 9 percent—or three times the nationalaverage—of its employees were engineers, physical scientists, life scien-tists, computer scientists, math scientists, and science/engineering man-


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agers (Markusen and others). This study identified 30 such industries,led by the “Guided Missiles and Space Vehicles” industry, which had 43percent of its employment in high-tech occupations.

This article uses two distinct measures to assess the level of high-tech activity in the Tenth District. Examining two very different meas-ures provides robustness to the study’s results. And, in some cases, itunderscores how the choice of measure can affect an area’s claim tobeing high tech.

The occupational measure

The first high-tech measure focuses on occupations. The occupa-tional measure is the percentage of an area’s employees who are scien-tists, engineers, or computer specialists (Appendix 1 provides a furtherbreakdown of the occupations).3 Instead of focusing only on industriesthat have a high percentage of such knowledge workers, as most recentstudies do, this article’s measure includes these workers across all indus-tries. Presumably, most of the workers in these highly skilled occupa-tions are performing high-tech work regardless of the industry in whichthey are employed. Moreover, local areas benefit from having theseworkers and their high wages, regardless of their industry.

According to the occupational measure, high-tech activity in theTenth District looks very similar to the national average (Chart 1). Inthe district, 5.2 percent of the workforce was employed in high-techoccupations in 2000, compared with 5.0 percent in the country as awhole. As a share of its total employment, the region has slightly fewerengineers than the country as a whole, but has an equal number of sci-entists and somewhat more computer specialists.

Perhaps not surprisingly, workers in high-tech occupations are notdistributed evenly across the region. Among the seven states that com-prise the Tenth District, only two—Colorado and New Mexico—scorehigher than the nation on the occupational measure. Although theremaining states all trail the countrywide average, these states often farewell in some occupations. For example, Nebraska has a slightly highershare of computer specialists than the nation, Kansas has more engi-neers, and Wyoming has more scientists.



The industry measure

The second high-tech measure used in the article focuses on indus-tries. The industry measure is the share of an area’s total employment infour key high-tech industries: computer and electronics manufacturing;software publishing; information and data processing services; and com-puter systems design and related services (Appendix 2 shows a furtherbreakdown of the industries).4 The industry measure is the same as theone used in a recent Brookings Institution study by Joseph Cortrightand Heike Mayer, and is similar to the measures used by most otherrecent studies of high-tech cities.5 Unlike the occupational measure,which looks at the level of high-tech activity occurring across all indus-tries, this measure focuses on how concentrated a place is in the mosthigh-tech of industries.

According to the most recent data, high-tech activity in the TenthDistrict slightly trails the nation on the industry measure (Chart 2). Inthe nation, 3.0 percent of the workforce was employed in a high-techindustry in 1999, compared with 2.6 percent in the district. On anindustry-by-industry basis, the district has much smaller concentrationsin the software publishing and computer and electronic manufacturing

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WyomingOklahomaMissouriNebraskaKansasNew

MexicoColoradoTenth

DistrictUnited States

Percent of total employment

ScientistsEngineersComputer specialists

5.0 5.2

7.7

6.4

4.7 4.54.1

3.73.3

Chart 1EMPLOYMENT IN HIGH-TECH OCCUPATIONS, 2000

Source: Occupational Employment Statistics



industries than the national average, but has a similar share of workersin computer systems design and a slightly larger presence in informa-tion and data processing services.

Among the seven district states, only Colorado scores well abovethe national average on the industry measure—and does so for all fourhigh-tech industries. Nebraska and New Mexico have similar shares ofworkers in high-tech industries as the nation, while Oklahoma, Mis-souri, Kansas, and Wyoming trail the nation considerably. Still, two ofthese district states have especially high concentrations of one or moreof the individual high-tech industries. Nebraska’s concentration of dataand information processing services is more than three times thenational average. And New Mexico’s share of computer and electronicproduct manufacturing workers is roughly twice the national average.

Looking at the amount of high-tech activity occurring in the TenthDistrict as a whole and in the states that comprise it makes for an inter-esting first take on where the region stands relative to the nation in the“New Economy.” But getting a more complete understanding of high-tech activity in the district requires looking at metropolitan areas, wherehigh-tech activity is concentrated.

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Computer systems design & related services

Software publishing

Information & data processing services

Computer & electronic product manufacturing

3.0

2.6

4.9

3.1

2.6

1.8 1.71.6

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Chart 2EMPLOYMENT IN HIGH-TECH INDUSTRIES, 1999

Source: County Business Patterns



II. DISTRICT CITIES ARE HIGH TECH FOR THEIR SIZE

Basic economic theory suggests that high-tech activity is morelikely to locate in more populous areas than in less populous ones. Withthe Tenth District having relatively few large cities, any tendency forhigh-tech activity to locate in large markets may explain why many dis-trict states trail national high-tech averages. This section first discusseswhy high-tech firms and workers may prefer larger markets and showsthat, across the nation, there appears to be a correlation between citysize and high-tech activity. The section then examines high-tech activityin the district at the metro area level, finding that the Tenth Districtappears to be quite high tech once the geographic distribution of itspopulation is taken into account.

Why do high-tech firms and workers prefer big cities?

Economic theory offers several different—but in some cases mutu-ally reinforcing—explanations for why high-tech activity might locatein larger markets. One is the employment benefit to workers of being ina large market. Since much high-tech work is relatively specialized,high-tech workers will prefer to locate where job opportunities aregreatest, typically in large metropolitan areas, so they can minimize thelikelihood of going without work. High-tech firms will consequentlyprefer to locate near these reliable supplies of high-tech laborers.

Highly skilled high-tech workers may also prefer certain recre-ational and cultural amenities—such as high-quality museums, zoos,performing arts venues, and professional sports teams—which are moretypically available in urban areas. Several studies have found that work-ers in high-tech occupations seem to place a premium on these quality-of-life benefits (Atkinson and Gottlieb; Kotkin and Devol). As a result,such workers may decide to live in large cities and high-tech firms willfollow them.

Another benefit of larger markets is the cost advantages they canprovide to high-tech businesses. Many high-tech firms require interme-diate goods and services in producing their products. Firms that providethese goods and services often prefer to locate in metro areas where they



can be near customers, thus saving on such costs as transportation.High-tech firms, in turn, can save costs in a similar way by locatingnear these suppliers of intermediate products.

Finally, the potential for knowledge spillovers provides another rea-son that high-tech firms may choose to be in a large market. Due to theknowledge-based nature of most high-tech activity, high-tech workersmay be relatively more productive when they are clustered together andcan take advantage of one another’s ideas (Orlando; Audretsch andFeldman). Therefore, high-tech firms will prefer to locate in dense pop-ulation centers where their workers can potentially be more productive.This higher productivity means firms can pay employees more, makingtheir urban location more attractive to high-tech workers.

Of course, despite all of these benefits, larger markets often havedownsides as well. Crime, pollution, and taxes are all generally higher inbig cities. In addition, a city experiencing an influx of people and firmsdue to the benefits mentioned above could also experience increases inhousing prices and traffic congestion, thus eventually making it a lessattractive place to live and do business. Given recent developments ininformation technology—primarily the Internet—that make it easierfor workers to interact with colleagues and customers regardless of loca-tion, lower cost rural areas and small cities might appear to have someadvantage in the “New Economy.” However, in most cases the benefitsto being in large markets appear to outweigh the costs for high-techfirms and workers, as recent research shows that these nonurban areashave fallen further behind larger metropolitan areas over the pastdecade (Kolko; Gaspar and Glaeser).

Data for the nation show that high-tech activity tends to increasewith the size of an area. Based on the occupational measure, high-techworkers clearly prefer urban to rural areas of the United States (Chart3).6 In fact, workers in high-tech occupations were nearly twice as likelyto be located in metro areas than nonmetro areas in 1999. In addition,high-tech concentration clearly intensifies with metro size (Table 1).Regardless of whether the occupational or industry measure is used, thenation’s very large metros (those with populations over 2 million) are atleast twice as concentrated in high-tech activity as very small cities(those with populations under 200,000). And the national high-techleaders among the large and very large metro areas—such as Austin



and the San Francisco Bay area—tend to be more concentrated than theleaders among the smaller metro areas—such as Colorado Springs andCedar Rapids. Exceptions to this trend are the national leaders amongsmall metro areas (population 200,000 to 500,000)—Huntsville, Mel-bourne-Titusville-Palm Bay, and Binghamton. However, each of thesemetros has a unique reason for its extremely high concentration of high-tech activity. Huntsville and Melbourne are both important NASA cen-ters, and Binghamton is the birthplace of IBM.

How do district cities measure up?

The fact that, all else equal, high-tech firms and workers tend tolocate in metro areas, especially in very large ones, has significant rami-fications for the Tenth District. In the country as a whole, 80 percent ofthe population lives in metro areas, with 44 percent living in very largeones. In the Tenth District, these percentages are only 67 percent and

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Chart 3EMPLOYMENT IN HIGH-TECH OCCUPATIONS,METRO VS. RURAL AREAS, 1999

Source: Occupational Employment Statistics



Table 1HIGH-TECH EMPLOYMENTIN U.S. METROPOLITAN AREAS

Percent of workers Percent of workersin high-tech in high-tech

occupations, 2000 industries, 1999**Metro size (National leaders) (National leaders)

Very large 7.4 4.4

(over 2 San Francisco-Oakland- San Francisco-Oakland-million) San Jose, CA: 12.7 San Jose, CA: 10.9

22 metros Seattle-Tacoma- Boston-Worcester-Bremerton, WA: 10.8 Lawrence, MA-NH-ME-CT: 7.7

Large 6.0 2.7

(1–2 million) Raleigh-Durham, NC: 12.2 Austin-San Marcos, TX: 9.2

27 metros Austin-San Marcos, TX: 11.0 Raleigh-Durham, NC: 5.2

Mid-sized 5.2 2.3

(500,000– Colorado Springs, CO: 9.6 Colorado Springs, CO: 8.71 million) Albuquerque, NM: 9.1 Omaha, NE: 5.132 metros

Small 4.9 2.0

(200,000– Huntsville, AL: 15.7 Huntsville, AL: 13.8500,000) Melbourne-Titusville-Palm Bay, FL: 12.9 Binghamton, NY: 12.584 metros

Very small 3.7 1.9

(under Cedar Rapids, IA: 10.4 State College, PA: 8.5200,000) Richland-Kennewick-Pasco, WA: 9.6 Sherman-Denison, TX: 8.3108 metros

Rural portions 2.9 n/aof states* Maryland: 6.1

California: 5.3

National average 5.0 3.0

* Rural occupational data are for 1999.** Industry data for some metropolitan areas reflect the midpoint of a range of employment.

Sources: Occupational Employment Statistics, County Business Patterns



17 percent, respectively. So not only does the region have a larger ruralpopulation than the country as a whole, but its metro areas are alsogenerally smaller. Considering the distribution of the region’s popula-tion, it is remarkable then that, on an overall basis, the Tenth Districtcompares so favorably with national high-tech averages.

Data on the 21 metropolitan statistical areas (MSAs) located in theTenth District show much of the region can be considered quite hightech (Table 2). Indeed, nearly all of the Tenth District’s larger metroareas exceed national high-tech averages for their city size. Nine of theten MSAs in the region with populations over 200,000 score above theirrespective countrywide averages on the occupational measure. OnlyOklahoma City, one of the smaller metros in its size category, trails itsnational benchmark. Seven of these larger cities also score above thenational average on the industry measure for cities their size, while Tulsaand Oklahoma City trail only slightly. The only real aberration is mid-sized Wichita, which lags the nation considerably on the industry meas-ure despite scoring well above the countrywide average on theoccupational measure. This discrepancy is likely due to the large num-ber of scientists and engineers working in research and development inWichita’s important aircraft manufacturing industry, an industry notclassified as high tech.

Moreover, several of the larger Tenth District cities are among thenation’s high-tech leaders for their city size. Colorado Springs, for exam-ple, is the nation’s mid-sized metro leader on both the industry andoccupational measures, and Albuquerque and Omaha rank secondamong mid-sized cities on the occupational and industry measures,respectively. In addition, Denver-Boulder-Greeley ranks third amongthe nation’s 22 very large metros on the occupational measure andfourth on the industry measure, while Fort Collins-Loveland ranksfourth out of 84 small metros on the industry measure and fifth on theoccupational measure.

Although the district’s larger metros seem well positioned in the“New Economy,” the high-tech story is not as encouraging among theregion’s smallest metros and rural areas. None of the Tenth District’s 11very small metros ranks above the countrywide average for its metrosize on both high-tech measures. Indeed, only four of these cities exceedthe national benchmark on the occupational measure and just two have



Table 2HIGH-TECH EMPLOYMENTIN TENTH DISTRICT METROPOLITAN AREAS

Percent of workers Percent of workersTenth district in high-tech in high-tech

Metro size metros occupations, 2000 industries, 1999**

Very large Denver-Boulder- 10.3 5.7(over 2 million) Greeley, CO

Large Kansas City, MO-KS 6.9 2.8(1-2 million) Oklahoma City, OK 4.9 2.3

Mid-sized Colorado Springs, CO 9.6 8.7(500,000- Albuquerque, NM 9.1 3.81 million) Wichita, KS 7.6 0.9

Omaha, NE 6.7 5.1Tulsa, OK 5.3 2.0

Small Fort Collins-Loveland, CO 8.8 7.2(200,000- Lincoln, NE 6.6 2.7500,000)

Very small Santa Fe, NM 5.6 1.5(under Topeka, KS 5.2 0.4200,000) Cheyenne, WY 4.3 1.0

Lawrence, KS 4.0 1.8Grand Junction, CO 3.5 2.7

Casper, WY 3.5 0.2St. Joseph, MO 2.8 0.3

Lawton, OK 2.8 1.9Pueblo, CO 2.7 0.1Joplin, MO 1.6 0.6Enid, OK 1.4 0.2

Rural portions Wyoming 3.6 n/aof states* Colorado 3.3 n/a

New Mexico 3.2 n/aNebraska 2.2 n/aMissouri 2.2 n/aKansas 2.1 n/a

Oklahoma 1.9 n/a

* Rural occupational data are for 1999.** Industry data for some metropolitan areas reflect the midpoint of a range of employment.Note: Bold figures indicate values above the national average for metro size.

Sources: Occupational Employment Statistics, County Business Patterns



CITY SIZE PREFERENCESOF HIGH-TECH INDUSTRIES

While high-tech firms in general clearly prefer larger markets to smallerones, not all high-tech industries are the same in this respect. The four high-techindustries that make up the industry measure in this article each appear to havepreferences for different sizes of metro areas. This phenomenon could obviouslyhave implications for the mix of high-tech activity in the Tenth District, given itsrelative lack of large metros.

The software publishing and computer systems design industries typi-cally make up a larger share of overall high-tech activity in the biggest metros(chart). Joel Kotkin and Ross Devol, in a 2001 study for The Milken Institute,explain why this might be: “To a large extent first-tier cities—with their enormousappeal to younger creative talent and cultural institutions—are most likely to reapthe benefits of the expanding ‘soft’ or content part of the technological revolution.”

Information and data processing firms, on the other hand, make up asizable share of high-tech activity in mid-sized metros, while computer and elec-tronic manufacturing companies dominate high-tech activity in the smallest metro

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Computer systems design & related servicesSoftware publishingInformation & data processing servicesComputer & electronic product manufacturing

ChartCOMPOSITION OF EMPLOYMENTIN HIGH-TECH INDUSTRIES BY METRO SIZE, 1999

Source: County Business Patterns



higher percentages on the industry measure. Many of these very smallcities fare poorly on the industry measure despite scoring near or abovethe national average on the occupational measure, perhaps suggestingthat a critical mass of people is necessary for some types of high-techindustries to locate in a place (see the accompanying box). Rural areas ofthe Tenth District also tend to be slightly less high tech than rural areasin the rest of the country (Chart 3). A dichotomy clearly exists, however,between the Plains states (Kansas, Missouri, Nebraska, and Oklahoma)and Mountain states (Colorado, New Mexico, and Wyoming). TheMountain states score considerably higher on the occupational measure.This difference could be due to several factors, such as the larger num-ber of scientists and engineers in the rural Mountain states due togreater mining activity there, or farming’s large percentage of totalemployment in many rural areas of the Plains states.

areas of the country. Like software and design companies, each of these two indus-tries relies to some degree on highly skilled workers and often must have a certainlevel of telecommunications infrastructure. However, these industries generally donot require as highly educated and creative of a workforce as the content indus-tries. Such firms therefore tend to base more of their location decisions on tradi-tional cost-of-doing-business factors, such as office rents and local wages, ratherthan on the quality-of-life factors that help attract workers in software and design.Kotkin and Devol suggest, “Lower cost, emerging-technology cities are most oftenbest suited to take advantage of the infrastructural and blue-collar functions asso-ciated with the digital economy.”

These national trends appear to largely hold true in the Tenth District.With its relatively larger number of mid-sized metros and relative lack of verylarge cities, the region has a somewhat larger overall presence in the informationand data processing industries than the nation and a slightly smaller presence insoftware publishing. The region also has a smaller presence in computer and elec-tronic manufacturing, as many of its smallest metros, where such industries tendto locate, trail national high-tech averages. The district has a similar presence incomputer systems design as the nation, despite its dearth of large cities, as Denverand Colorado Springs have especially high concentrations of these firms.



Like the nation, the Tenth District’s larger metro areas tend to bemore high tech than its smaller metros and rural areas. Beyond thistrend, most of the district’s larger metros score well above national high-tech averages for cities their size. What is it about certain Tenth Districtcities that make them more high tech than their size might suggest?

III. CASE STUDIES OF HIGH-TECH DISTRICT CITIES

This section takes a more detailed look at what makes some districtcities so high tech. It considers brief case studies of 11 metros in theregion that score particularly well on the high-tech measures used in thearticle. These case studies suggest three primary reasons for why ametro might be more high tech than expected given its size. First, themetro has a large military-related research institution located within itsborders. Second, the metro hosts a major research university. And third,the metro has long been home to employers of large numbers of cre-ative people. The case studies also suggest a secondary reason why manydistrict cities are attractive to high-tech workers and firms—proximityto significant cultural and recreational opportunities.

Military-related research institutions

Government military institutions have almost certainly increasedhigh-tech activity in several metro areas in the Tenth District. In partic-ular, the opening of military research centers near Omaha, Albu-querque, Santa Fe, and Colorado Springs in the 1940s and 1950s stillcontributes to high-tech activity in those cities. Such institutionsattracted and produced scores of scientists, engineers, and computerspecialists over the years, many of whom, in time, have started high-tech businesses of their own.

Omaha, Nebraska, identified by some recent studies as an “emerg-ing” high-tech center, was aided tremendously by the location of theU.S. military’s Strategic Air Command at nearby Offutt Air Force Basefollowing World War II. The Command has laid miles of fiber opticcable, helping the city become one of nation’s back-office high-techleaders (Rogers; Atkinson and Gottlieb). Omaha is now home to a largenumber of data processing centers and computer-outsourcing firms. In



addition, after losing perhaps the city’s highest-profile employer ofhigh-tech workers—Level 3 Communications—to Denver in 1997,local universities created several technology-focused institutions toensure the development of future generations of high-tech workers. Asa result, its “emerging” label notwithstanding, Omaha is already quitehigh tech, as only Colorado Springs has a higher percentage of workersin high-tech industries among the nation’s mid-sized metro areas.

Another city frequently cited in recent studies of high-tech activity,Albuquerque, New Mexico, has almost certainly benefited from havingthe Sandia National Laboratory located within its boundaries and theLos Alamos National Laboratory located nearby. Established duringWorld War II, these government labs have worked closely with elec-tronics firms, helping Albuquerque attract large Intel, Honeywell, andPhillips Semiconductors plants. The presence of these plants hasresulted in the metro being considered the most concentrated of anycity in the country in terms of high-tech manufacturing output (Devol).In addition to the big factories, Albuquerque is also home to manysmaller technology firms, many of them started by former lab employ-ees. The metro also hosts the University of New Mexico, providinganother source of high-tech workers and ideas.

The Los Alamos National Laboratory has also undoubtedly helpedsupply scenic Santa Fe, New Mexico, with a large number of scientistsand engineers over the years. Santa Fe hosts relatively few high-techcompanies for a city its size, yet it is still the center of a considerableamount of high-tech activity. The city ranks among the top 20 percentof very small metros on the occupational measure. This dense supply ofknowledge workers in the metro has led to the development of a coupleof relatively new high-tech fields—complexity science and informatics(German). Firms in these fields mine and analyze complex data pro-duced by companies to help them enhance productivity and improvethe quality of their goods and services.

Important military institutions—including the North American SpaceCommand at Cheyenne Mountain and the U.S. Air Force Academy—havealso endowed Colorado Springs, Colorado, with an abundance of high-techworkers over the years. In fact, the city ranks as the national leader amongthe country’s mid-sized metros (population 500,000 to 1 million) on boththe occupational and industry measures. While the metro does not serve as



the headquarters city for major high-tech players, it is home to largebranch plants for Apple, Digital Equipment, and Hewlett-Packard. Inaddition to computer manufacturers, the city also has burgeoning softwareand computer systems design industries.

Large research universities

While mid-20th century decisions about where to locate importantmilitary centers appear to be the major contributor to current high-techactivity in several district metros, much earlier government decisionsabout where to locate major state universities has aided high-tech devel-opment in several other cities in the region. As big university towns,Lincoln, Lawrence, and Fort Collins have benefited from their densesupplies of researchers and scientists for many years, positioning themwell to compete in the “New Economy.”7

While Omaha gets most of the attention as Nebraska’s high-techcenter, Lincoln also has a high percentage of workers in both high-techindustries and high-tech occupations. As home to the University ofNebraska, Lincoln has benefited for many years from a steady supply ofpotential high-tech workers and should continue to do so in the future.Nebraska’s state capital is home to many information processing andcomputer systems design firms, as well as branch plants of several man-ufacturers of communications equipment.

Lawrence, Kansas, also benefits greatly from hosting a major stateuniversity. Students and researchers from the University of Kansas haveserved as potential high-tech entrepreneurs and employees in the metrofor many years. Indeed, the city ranks above the very small metro aver-age on the occupational measure and is right at the national benchmarkon the industry measure. For a city its size, Lawrence has a relativelylarge number of software and design firms—types of companies oftenstarted by young, creative minds. In addition to these businesses, thevery small metro has spawned several successful biotechnology compa-nies over the years and is also home to a Honeywell electronics plant.

Hosting the Colorado State University has likely helped the FortCollins-Loveland metro area become one of the most high-tech placesin the country for its size. Only Huntsville, Alabama, and Melbourne-Titusville-Palm Bay, Florida—metros chosen as important NASA cen-



ters in the late 1950s—rank higher on both measures of high-techactivity among the nation’s small metro areas (population 200,000 to500,000). Fort Collins-Loveland is home to large Hewlett-Packard andAgilent Technologies plants, as well as a growing number of computersystems design companies.

History of innovative companies

Long-standing institutions also appear to have played an importantrole in developing a culture of high technology in the Denver-Boulder-Greeley, Kansas City, and Tulsa metros over the years. However, unlikein the previous case studies in this section, these cities appear to havebenefited most from hosting private companies with a long history ofemploying large numbers of highly skilled and creative people. To somedegree, these cities have always been high tech, for reasons that are dif-ficult to pinpoint.

The Denver-Boulder-Greeley metro area in Colorado has generallybeen acknowledged as one of the country’s high-tech leaders in therecent studies of high-tech cities. While many factors may have con-tributed to this status, including the location of the University of Col-orado in Boulder, perhaps none is as important as the metro’s history ofinnovative companies. Denver has a long-standing presence in a varietyof high-tech industries. Storage Tech and IBM have had large data stor-age facilities in the metro for quite some time. Several big telecommu-nications firms, with large numbers of workers in high-techoccupations, also have long been headquartered or had large facilities inDenver, and the metro is home to some of the largest cable televisioncompanies in the country. Among very large metro areas, only the SanFrancisco Bay area ranks higher than Denver-Boulder-Greeley on bothhigh-tech measures used in this article. In fact, roughly a third of all thehigh-tech workers in the Tenth District work in the metro. Denver hadnearly 70,000 workers in high-tech industries and about 110,000 work-ers in high-tech occupations in 1999. The Boulder portion of the metrois particularly high tech, with only the Silicon Valley (San Jose) portionof the San Francisco Bay area having a larger percentage of high-techworkers among the country’s sub-metros.



The Kansas City metro area, which straddles the Kansas-Missouriborder, has also long been home to several private companies thatemployed sizable numbers of workers in high-tech occupations, includ-ing Sprint, Hallmark Cards, the Midwest Research Institute, and theformer Marion Laboratories (now part of Aventis Pharma). Indeed, thecity ranks among the top five large metropolitan areas on the occupa-tional measure. Kansas City scores less well on the industry measure,although it still ranks above the national average for its city size. Thesoftware publishing and computer systems design industries have alarge presence, with Cerner and DST Systems headquartered in themetro. Life sciences research is also becoming a fixture in Kansas City,anchored by the Stowers Institute for Medical Research, the Life Sci-ences Institute, Bayer Cropsciences, and the University of Kansas Med-ical Center.

Whereas Denver and Kansas City have a history of hosting innova-tive companies in a variety of industries, Tulsa, Oklahoma’s source ofinnovative talent has come primarily from its long-important energysector. Although the city’s last great energy boom ended in the mid-1980s, the oil companies left an abundance of highly skilled workers. Inaddition, one pipeline company—The Williams Company—has largelytransformed itself into a “New Economy” giant. In the early 1990s,Williams took advantage of its vast underground rights-of-way to laymiles upon miles of fiber optic cable. In 1998, Williams Communica-tions was spun off from The Williams Companies and, despite therecent financial difficulties that have plagued the telecommunicationsindustry, Wil-Com has helped push Tulsa into the “New Economy.”Tulsa also hosts a number of small software and design firms.

High amenity levels

In addition to city size and hosting long-standing government andprivate institutions, a secondary feature of many district cities appearsto aid their level of high-tech activity as well—proximity to abundantrecreational and cultural opportunities.

The Colorado metros are the most obvious beneficiaries of naturalamenities, given their proximity to the Rocky Mountains. In fact, thefinal metro included in these case studies, Grand Junction, Colorado,



probably owes most of its above average standing on the high-techindustry measure (and near average standing on the occupational meas-ure) to its scenic beauty. While not as high tech as the larger cities on theeastern slope of the Rockies, the metro hosts several relatively large high-tech plants, including CoorsTek, a maker of high-tech components, andAMETEK/Dixson, a producer of intricate measuring instruments.

Beyond the Rocky Mountains, however, other examples of recre-ational and cultural opportunities across the district more than likelyhave helped several metros become and stay more high tech than theirsize might suggest. Santa Fe, for example, has become a national touristdestination and cultural mecca. Moreover, the same long-standing com-panies that have provided Denver, Kansas City, and Tulsa with largenumbers of high-tech workers have also served as philanthropic giantsin those cities over the years, providing each city with a wealth of cul-tural institutions. Finally, cities such as Fort Collins, Colorado Springs,and Lawrence undoubtedly benefit from being within an hour’s drive ofthe cultural opportunities of Denver or Kansas City.

IV. CONCLUSIONS

The Tenth District is remarkably high tech given its relatively largerural population and shortage of major metro areas. For various reasons,all of the metro areas in the region with more than 200,000 peoplecompare favorably with other cities their size in high-tech concentra-tion. Several metros are among the most high-tech places in the nationfor their size.

Accordingly, much of the Tenth District seems well positioned inthe “New Economy.” Perhaps the biggest positive factor heading for-ward is that the district as a whole is just as concentrated in workers inhigh-tech occupations as the country. This concentration of knowledgeworkers is important given how quickly high-tech goods and servicescan become not so high tech. Several decades ago, the production ofdishwashers and coffeemakers constituted high-tech activity. Having alarge number of people with high-tech knowledge and skills shouldmake transition to new types of high-tech activity easier for most of theregion’s metropolitan areas.



To be sure, though, being high tech is no guarantee of continuousprosperity. The district’s high-tech leader—Colorado—was hit veryhard by the high-tech downturn of 2001. According to the Denver Post,over 10,000 technology workers in that state lost their jobs last year(Hudson). This significant decline illustrates that, while high-tech con-centration can lead to sizable increases in local incomes and rapid jobgrowth at times, the potential for periodic sharp downturns also exists.



APPENDIX IHIGH-TECH OCCUPATIONS

SOC Occupation title

15 Computer Specialists15-1011 Computer and Information Scientists, Research15-1021 Computer Programmers15-1031 Computer Software Engineers, Applications15-1032 Computer Software Engineers, Systems Software15-1041 Computer Support Specialists15-1051 Computer Systems Analysts15-1061 Database Administrators15-1071 Network and Computer Systems Administrators15-1081 Network Systems and Data Communications Analysts15-2011 Actuaries*15-2021 Mathematicians15-2031 Operations Research Analysts15-2041 Statisticians15-2091 Mathematical Technicians

17 Engineers17-1011 Architects, Except Landscape and Naval*17-1012 Landscape Architects*17-1021 Cartographers and Photogrammetrists*17-1022 Surveyors*17-2011 Aerospace Engineers17-2021 Agricultural Engineers17-2031 Biomedical Engineers17-2041 Chemical Engineers17-2051 Civil Engineers17-2061 Computer Hardware Engineers17-2071 Electrical Engineers17-2072 Electronics Engineers, Except Computer17-2081 Environmental Engineers17-2111 Health and Safety Engineers, Except Mining 17-2112 Industrial Engineers17-2121 Marine Engineers and Naval Architects17-2131 Materials Engineers17-2141 Mechanical Engineers17-2151 Mining and Geological Engineers, Including Mining 17-2161 Nuclear Engineers17-2171 Petroleum Engineers17-3011 Architectural and Civil Drafters*




17-3012 Electrical and Electronics Drafters*17-3013 Mechanical Drafters*17-3021 Aerospace Engineering and Operations Technicians17-3022 Civil Engineering Technicians17-3023 Electrical and Electronic Engineering Technicians17-3024 Electro-Mechanical Technicians17-3025 Environmental Engineering Technicians17-3026 Industrial Engineering Technicians17-3027 Mechanical Engineering Technicians17-3031 Surveying and Mapping Technicians*

19 Scientists19-1010 Agricultural and Food Scientists19-1021 Biochemists and Biophysicists19-1022 Microbiologists19-1023 Zoologists and Wildlife Biologists19-1031 Conservation Scientists19-1032 Foresters19-1041 Epidemiologists19-1042 Medical Scientists, Except Epidemiologists19-2011 Astronomers19-2012 Physicists19-2021 Atmospheric and Space Scientists19-2031 Chemists19-2032 Materials Scientists19-2041 Environmental Scientists, Including Health19-2042 Geoscientists, Except Hydrologists and Geographers19-2043 Hydrologists19-3011 Economists*19-3021 Market Research Analysts*19-3022 Survey Researchers*19-3031 Clinical, Counseling, and School Psychologists*19-3032 Industrial-Organizational Psychologists*19-3041 Sociologists*19-3051 Urban and Regional Planners*19-3091 Anthropologists and Archeologists*19-3092 Geographers*19-3093 Historians*19-3094 Political Scientists*19-4011 Agricultural and Food Science Technicians19-4021 Biological Technicians19-4031 Chemical Technicians




19-4041 Geological and Petroleum Technicians19-4051 Nuclear Technicians19-4091 Environmental Science Techs, Including Health19-4092 Forensic Science Technicians19-4093 Forest and Conservation Technicians

Note: Occupations marked with an asterisk (*) are not considered high tech by some or all of therecent studies of high-tech cities. They are included in order to have comparable data across all geo-graphic levels.



APPENDIX 2HIGH-TECH INDUSTRIES

NAICS Industry title

334 Computer and Electronic Product Manufacturing334111 Electronic Computer Manufacturing334112 Computer Storage Device Manufacturing334113 Computer Terminal Manufacturing334119 Other Computer Peripheral Equipment Manufacturing334210 Telephone Apparatus Manufacturing334220 Radio and Television Broadcasting and Wireless Communications

Equipment Manufacturing334290 Other Communications Equipment Manufacturing334310 Audio and Video Equipment Manufacturing334411 Electron Tube Manufacturing334412 Bare Printed Circuit Board Manufacturing334413 Semiconductor and Related Device Manufacturing334414 Electronic Capacitor Manufacturing334415 Electronic Resistor Manufacturing334416 Electronic Coil, Transformer, and Other Inductor Manufacturing334417 Electronic Connector Manufacturing334418 Printed Circuit Assembly (Electronic Assembly) Manufacturing334419 Other Electronic Component Manufacturing334510 Electromedical and Electrotherapeutic Apparatus Manufacturing334511 Search, Detection, Navigation, Guidance, Aeronautical, and

Nautical System and Instrument Manufacturing334512 Automatic Environmental Control Manufacturing for Residential,

Commercial, and Appliance Use334513 Instruments and Related Products Manufacturing for Measuring,

Displaying, and Controlling Industrial Process Variables334514 Totalizing Fluid Meter and Counting Device Manufacturing334515 Instrument Manufacturing for Measuring and Testing Electricity

and Electrical Signals334516 Analytical Laboratory Instrument Manufacturing334517 Irradiation Apparatus Manufacturing334518 Watch, Clock, and Part Manufacturing334519 Other Measuring and Controlling Device Manufacturing334611 Software Reproducing334612 Prerecorded Compact Disc (except Software), Tape, and Record

Reproducing334613 Magnetic and Optical Recording Media Manufacturing



NAICS Industry title

5112 Software Publishers511210 Software Publishers

514 Information and Data Processing Services514110 News Syndicates*514120 Libraries and Archives*514191 On-Line Information Services514199 All Other Information Services*514210 Data Processing Services

5415 Computer Systems Design and Related Services541511 Custom Computer Programming Services541512 Computer Systems Design Services541513 Computer Facilities Management Services541519 Other Computer Related Services

Note: Industries marked with an asterisk (*) are not considered high tech by some or all of therecent studies of high-tech cities. They are included in order to have comparable data across all geo-graphic levels.



ENDNOTES

1 The Tenth Federal Reserve District includes the entire states of Colorado,Kansas, Nebraska, Oklahoma, and Wyoming, plus the northern half of New Mex-ico and the western third of Missouri.

2 Quite often, total employment in these chosen industries is used as anapproximation for their output, due to lack of data on actual output.

3 The measure also includes architects and social scientists, which are not con-sidered high-tech occupations by many studies. Excluding these occupations, how-ever, would involve using occupational data below the major group level, which ismissing for many areas. At the national level, architects and social scientistsaccount for only 6 percent of the “high-tech” total, so including them in a high-tech measure likely still gives a fairly accurate view of how high tech a place is. Thehigh-tech occupational measure, when possible, is based on the new StandardOccupational Codes (SOC) produced by the Bureau of Labor Statistics in 2001.The data used for analysis are 2000 Occupational Employment Statistics.

4 The use of employment data rather than output data in the measure is duelargely to the lack of detailed output data at smaller levels of geography, whichprevents comparison across all geography groups. In addition, employment levelsare quite often more important to local areas than output levels, given employ-ment’s impact on local incomes. Definitions of the high-tech industries used in thisarticle are based on the new North American Industrial Classification System(NAICS) produced for the 1997 Economic Census results. The data used for analy-sis are 1999 County Business Patterns. Data for 2000 were available at the statelevel through the ES-202 program. However, much data were missing at the sub-state level. In addition, the program uses the old SIC classification system ratherthan the new NAICS.

5 One difference from many of the recent studies is the exclusion of telecom-munications services as a high-tech industry. While telecom companies are cer-tainly involved in high-tech work, a significant portion of their employment isinvolved in low-tech service provision. Moreover, telecom equipment manufactur-ing is already included in computer and electronic product manufacturing. Fur-thermore, in those areas with high concentrations of telecom firms (such as Denverand Kansas City in the Tenth District), high-tech telecom workers are already cap-tured by the occupational measure.

6 Rural industry data were unavailable.7 Lincoln, Lawrence, and Fort Collins have also all undoubtedly benefited

from being within an hour’s drive of a much larger metro area (Omaha, KansasCity, and Denver, respectively).



REFERENCES

Atkinson, Robert D., and Paul D. Gottlieb. 2001. “The Metropolitan New Econ-omy Index: Benchmarking Economic Transformation in the Nation’s Metro-politan Areas,” Progressive Policy Institute, April.

Audretsch, David B., and Maryann P. Feldman. 1996. “R&D Spillovers and theGeography of Innovation and Production,” American Economic Review, June.

Cortright, Joseph, and Heike Mayer. 2001. “High Tech Specialization: A Compari-son of High Technology Centers,” Brookings Institution Survey Series, January.

Devol, Ross C. 1999. “America’s High-Tech Economy: Growth, Development, andRisks for Metropolitan Areas,” Milken Institute, July.

Gaspar, Jess, and Edward L. Glaeser. 1998. “Information Technology and theFuture of Cities,” Journal of Urban Economics, January.

German, John D. III. 2001. “The Info Mesa,” New Mexico Business Journal, September.Hecker, Daniel. 1999. “High-Technology Employment: A Broader View,” Monthly

Labor Review, U.S. Department of Labor, June.Hudson, Kris. 2001. “2001 a Cold, Hard Year of Job Cuts,” Denver Post, December 23.Kolko, Jed. 2000. “The High-Tech Rural Renaissance? Information Technology,

Firm Size, and Rural Employment Growth,” Essays on Information Technology,Cities, and Location Choice, Harvard University, July.

Kotkin, Joel, and Ross C. Devol. 2001. “Knowledge-Value Cities in the DigitalAge,” Milken Institute, February.

Markusen, Ann, Karen Chapple, Greg Schrock, Daisaku Yamamoto, and PinhkangYu. 2001. “High-Tech and I-Tech: How Metros Rank and Specialize,” Projecton Regional and Industrial Economics, Humphrey Institute of Public Affairs,University of Minnesota, August.

Orlando, Michael. 2000. “On the Importance of Geographic and TechnologicalProximity for R&D Spillovers: An Empirical Investigation,” Federal ReserveBank of Kansas City, working paper no. 00-02, July.

Rogers, Adam. 2001. “A New Brand of Tech Cities,” Newsweek, April 30.


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